Ninety days after we warned QuantumScape (QS), a developer of solid-state lithium batteries for electric vehicles, has pushed out the commercialization of its batteries by up to a year, the company is now hinting prototypes for test cars may also be delayed.

Last quarter, QuantumScape used language suggesting prototypes for test cars would be ready by the beginning of 2023:

“...we will continue developing our battery technology with the goal of enabling customer prototype sampling in 2022, samples for use in test cars by 2023…”

In its latest 10-Q, QuantumScape changes one word in the filing that seems to indicate prototypes for test cars may not be ready by 2023, but rather sometime in 2023:

“...we will continue developing our battery technology with the goal of enabling customer prototype sampling in 2022, samples for use in test cars in 2023…”

It’s a subtle but intentional change that could further push commercialization toward 2025. Delays may also jeopardize QuantumScape’s new relationship with a second, unnamed top ten automotive OEM, which recently agreed to evaluate prototypes and test them in their pre-series vehicles.

In addition to technological challenges, potential delays may be related to previously undisclosed, customer-required safety requirements for multi-layer batteries QuantumScape is developing. Though QuantumScape acknowledges a commercially viable solid-state battery may require several dozen to more than one hundred cell layers, it’s only now testing a 10-layer cell.

In the latest filing, QuantumScape includes new language suggesting its multi-layer cells are under additional safety scrutiny (new language is highlighted):

“In addition, our multi-layer battery cells must simultaneously satisfy all of the commercial and safety requirements of our customers.”

Later, when warning of potential risks, QuantumScape again includes new language suggesting the safety of its multi-layer cells are now a concern for customers (new language is highlighted):

“We face inherent risk of exposure to claims in the event our batteries do not perform as expected, fail to meet relevant safety standards or requirements, or malfunction…”

Separately, QuantumScape is warning of a selloff unless shareholders approve a lucrative executive compensation program potentially worth billions of dollars. The company calls it an Extraordinary Performance Award Program (EPA) and is asking shareholders to approve it at the annual meeting in Q4 2021.

The program incents senior management by tying equity awards to the achievement of certain business milestones and stock price targets over a 10-year period. The stock options would vest in five tranches and at stock price targets of $60, $120, $180, $240 and $300. The options granted under the EPA may total up to 4% of QuantumScape’s shares outstanding.

In a supplemental filing, QuantumScape revealed half of the options under the plan would be awarded to its CEO, Jagdeep Singh.

QuantumScape isn’t quantifying the payout for investors so we will.

The 16.8 million shares that may be awarded under the plan would be worth between $1.0 billion and $5.0 billion. If QuantumScape achieves all of its business milestones and the stock price hits $300 in ten years, Singh stands to make $2.5 billion. The rest will be spread across 14 other QuantumScape executives.

In the latest quarterly filing, QuantumScape suggests investors had better approve the plan if they know what’s good for them:

“However, if the EPA Program is not approved by stockholders, this may harm investor confidence in the Company and our share price may decrease.”